Music Industry Expert Bob Lefsetz: “You’re Being Screwed By The Label”

In the ongoing debate around artist royalty payments, nobody is in the news more often than Spotify. You don’t need to look far for story after story of artists claiming Spotify doesn’t pay them nearly enough money. Now industry expert and regular keynote speaker Bob Lefsetz is weighing in on the Spotify/artists/royalties debate.

In short, Lefsetz claims that it isn’t Spotify artists should be upset with. “Spotify is already paying out 69%+ of its revenues. What’s the truth? You’re being screwed by the label. And Spotify can’t say this, because the labels are their partners.”

Lefsetz’s claim is that streaming services like Spotify can only pay the money to the labels, based on agreements the labels make. It’s up to the labels to deliver meaningful royalties to their artists. His suggestion? Be your own label. We’ve suggested that before, too.

Read the full Lefsetz Letter below:

My inbox fills up with both the famous and infamous, the known and the irrelevant, bitching about Spotify payments, they think the Swedish company is the devil. They believe Daniel Ek got rich off the backs of musicians and this wrong must be righted, that there will be no harmony until he is dethroned and the service pays them a higher rate.

But Spotify is already paying out 69%+ of its revenues.

What’s the truth?

You’re being screwed by the label. And Spotify can’t say this, because the labels are their partners.

Of course there’s more to the story. Songwriters are getting the shaft, they are getting a lesser percentage than they deserve. And marginal artists are getting a tiny share of the pie. But assuming you’re playing for real, that people are actually listening to your music, that it’s not just posted on Spotify and hanging out in darkness, if you want to get paid cut out the middleman.

It’s kind of like what Amazon did. Getting rid of bricks and mortar (although they do have a couple of bookstores now, but really those are showrooms for Amazon products, flagship stores to display their wares, like the Sony store in New York, or the high-end outlets in Aspen). If you want to survive in the new world you’ve got to look at business differently. So, if you record and release your music independently, paying a one time distribution fee to Tunecore or the like, you’ll get all that revenue, assuming someone is listening.

Oh, Tunecore! What about Jeff Price, its old fired founder, bitching that Spotify is not paying on so many tracks? That’s a registry problem, that’s not Spotify seeking to rip-off rights holders, that’s the result of an archaic system wherein we don’t know who wrote what and who owns what. Does it need to be cleared up? Yes. Is it good Jeff is on the case? Yes, but this is not wholesale exposure of Mafia-like activity, but it’s a better news story than old, cranky musician who used to survive quite well under the old system is starving now, although that story gets a lot of ink too. Kinda like the endless physical book articles in the “New York Times.” You can’t separate the bias from the author, oftentimes writers are out of touch, they believe they can will the result they desire, but one thing we’ve learned in the past twenty years is the customer is ultimately in control, and the customer chose streaming.

But you’ve got an historical deal with a label that pays an incredibly low percentage, you’ve got a very low royalty rate, is this a problem? Absolutely. BUT IT IS NOT SPOTIFY’S FAULT!

Acts have been railing that they’ve gotten screwed by labels since their invention. A bit of progress has been made, but not enough. Having said that, if you’re a new act it’s your prerogative whether to sign with a label or not.

You don’t need the label for physical distribution, that’s a dying business, forget manufacturing and shipping.

You need a label for publicity and radio promotion. You can hire third parties for publicity. As for radio promotion? For all intents and purposes indies are closed out of Top Forty radio. So if you’re playing to win, you need a label, you’ve got to sign a deal. But, the terms vary depending upon the heat you come in with. Used to be heat meant the music, today it means the data. How many fans have you got, what are your social numbers, how much money are you making on the road? The less you need the label the more they need you, and this is reflected in the terms of the deal.

As for the money… The days of big advances are through. If it’s just money you need, you’re better off looking elsewhere. Making it yourself on the road or raising it via friends and family. Then again, the dirty little secret of the new world is that it’s so much cheaper than it was in the days of yore. Everybody can own Pro Tools, you can make the record at home, many famous acts do, and promote it for free online. And don’t be one of those wankers who e-mails me you’ve got to spend a lot of money and work with pros to have a great sound. Generally speaking that is true. But then you’re probably gonna sign a major deal and e-mail me you’re getting screwed by your label. Which way do you want it? Do you want to roll the dice for all the money or hoard it all at a small level? Because believe me, if you sign with a major and you actually hit, there will be plenty of coin. However, the label could end up with the lion’s share, certainly of the recording income.

And I think it’s abhorrent that royalty deals are such that artists pay for their records and labels own them. It’s not this way in the book business.

There are so many problems with label deals. And they need to be changed. But they’ve got nothing to do with Spotify’s payout.

This is akin to Ticketmaster, people bitching about fees, not understanding that the acts themselves are responsible, this is the only way to get income out of the commission stream. And if you saw how little a concert promoter makes after putting up so much dough for a show, risking so much, you’d probably have sympathy for them. But concert promoters woke up and started festivals, where they can make so much more since they own the event. Concert promoters evolved.

And you should too.

But chances are you want to be a star. And right now, in today’s cluttered internet world, the odds of doing that without a label are de minimis.

Then again, today everyone can play, and everyone can bitch. And that includes the never-will-bes and the old artists, akin to the screwed bluesmen, who’ve got deals so heinous they can never make bank.

But, once again, this has nothing to do with Spotify.

P.S. For the umpteenth time, I have no investment in Spotify, I make no money from the company. But Spotify put a huge dent in piracy, the problem everyone talked about last decade, and as a result of streaming services recording revenues are finally going up, our long nightmare is ending. You’ve got to live in the present, with an eye to the future, you can’t keep dreaming about an old love in a world without cameras, the audience loves the present and the audience pays your bills. Think of ways to satiate those who pay.

P.P.S The penny rate. There is no penny rate, it’s a percentage rate Spotify pays. But they came up with an approximate penny rate so oldsters could understand what they were making on streams. As more people subscribe and listen, the payment per stream will actually go down. Meaning you’re gonna have to have more listens to make the same amount of money. But listens are growing exponentially to the point where those artists at the top of the heap are quite well compensated. But if your listens are not in the millions, you’d better think of alternative ways to get paid. Used to be you could sell a few thousand albums and make money. That paradigm, unfortunately, is dying, although you can still sell CDs as souvenirs along with other merch at the show. Then again, is it Spotify’s responsibility to promote new music, especially the new and different, playlist it and bring it to the forefront? That’s a whole ‘nother issue.